Direct Evidence on Risk Attitudes and Migration

TLDR: This paper found that individuals who are more willing to take risks are more likely to migrate between labor markets in Germany, and this result is robust to stratifying by age, sex, education, national origin and a variety of other demographic characteristics, as well as to the level of aggregation used to define geographic mobility.

Abstract: Geographic mobility is important for the functioning of labor markets because it brings labor resources to where they can be most efficiently used. It has long been hypothesized that individuals' migration propensities depend on their attitudes towards risk, but the empirical evidence, to the extent that it exists, has been indirect. In this paper, we use newly available data from the German Socio-Economic Panel to measure directly the relationship between migration propensities and attitudes towards risk. We find that individuals who are more willing to take risks are more likely to migrate between labor markets in Germany. This result is robust to stratifying by age, sex, education, national origin, and a variety of other demographic characteristics, as well as to the level of aggregation used to define geographic mobility. The effect is substantial relative to the unconditional migration propensity and compared to the conventional determinants of migration. We also find that being more willing to take risks is more important for the extensive than for the intensive margin of migration.

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Table 1 Average Measures of Risk Attitudes for Stayers and Movers

Table 2 Risk Attitudes and the Probability of Migrating between 2000 and 2005

Table 5 Risk Attitudes and Probability of Migrating: Random Effects Probit

Table 4 Risk Attitudes and Probility of Migrating, before and after Posing of Risk Questions

Table 3 Risk Attitudes and the Probability of Migrating between 2000 and 2005: Sensitivity to Different Definitions of Geographic Mobility

Figure 2 General Risk Attitudes for Movers and Stayers